The GBP/USD pair fell heavily during the session on Thursday, after printing a shooting star on Wednesday. This suggests further weakness in this currency pair, which is a bit surprising considering how strong it had been recently. However, I do have the 1.60 level as a significant support area, and we will have to see whether or not that holds in order to garner some type of future direction in this pair in my opinion.
The triangle that I have drawn on this chart suggest that a move to the 1.63 level, which of course we did reach finally. So to see a pullback wasn't much of surprise, and more interestingly the 1.60 level is the 50% retrace of the breakout at 1.57, so this area is of particular interest to me. This is why I have it as a hot pink line on the chart because I want to draw so much attention to it. This is why the weakness on Thursday actually concerns me.
I am currently flat of this market, but will be buying supportive action near the 1.60 level. However, history tells me that a break down in a range that closes towards the bottom like Thursday did normally means there's more weakness to come. We are just 56 pips above the handle, and as such it will be interesting to see how this currency pair acts.
There are other areas
The 1.60 level is the first major support area that I have, but the truth is I see the 1.58 and obviously the 1.57 levels of supportive also. In fact, I'm not ready to short despair even if the 1.6 level is blown past, because of those areas. Ultimately, the interest-rate differential favors the United Kingdom, and this of course is one of the most fundamental reasons a currency pair will move over time.
I am looking for support to buy it isn't until sub-1.57 that I am willing to short, but at that point time I would be aggressively short of this pair as it would almost undoubtedly had to the 1.52 level. In the meantime, all I can do simply wait.